The market is retesting the lows (SPY 362.17), expect a bounce of some kind. Might be for an hour, a day, or a week, but a bounce is coming.
**Why would the market bounce?**
* Markets don’t move in a straight line, we have been going straight down since the Fed meeting
* Shorts are going to cover (if they didn’t already in the last hour on Friday)
* People who bought puts in the last 3 days since Powells speech are going to close them for gains now that they got the down move and VIX is elevated
* When people close out long puts, VIX comes down
* 3 day rule applies: the third day after the Fed meeting is Monday 9-26
* People say “the market doesn’t bottom on a Friday” so expect another gap down at open or the June 17th lows to be tested early in the AM
* The dumb retail traders who are late will read the news over the weekend, and the fear sets in, so they sell on Monday (in theory)
* In the last hour of the day expect a rally as shorts cover and figure that the down move is at least over for now
* “They” are going to want to sell their puts while VIX is still high – or close their equity shorts before the other guy does
* Once one short covers, another short is going to want to cover as well before their gains are wiped out
* We all know what a short squeeze is, right?
* Markets hate uncertainty, but the big event (Fed speech) is over now
* Uncertainty has been reduced
* All the other central banks just finished a global coordinated rate hike – that is behind us now
* No more Fed meetings until Nov 3rd. Pow has been hawkish 3 times in a row now, “rumor” is he has to be more dovish next time right? Aren’t we feeling the pain now?
* Buy the rumor they say
* Oil died so that feeds into the “inflation is coming down narrative”
* The last CPI was a surprise because people were expecting a “better” number
* Now everyone is scared and is expecting a “worse” number so any data that comes in not as bad as expected, will send the markets higher
* Rates on the 2yr and 10yr have been on a straight up rally, so it is more likely they “revert” than continue (at least in the short term)
* At some point the cash sitting on the sidelines comes back into the market
* Remember everyone that sold the last few days? They didn’t buy bonds (check the rates), they didn’t buy gold, they didn’t really buy “safe” stocks either – they went to cash and they bought puts. Cash gets spent and puts get closed
**Look at this primitive cave painting I have prepared for you:**
[I made lines on a chart that confirm my bias](https://preview.redd.it/g26q3sdx1vp91.png?width=1307&format=png&auto=webp&s=6452399bac3693d8d7b3ff1267c2eb518011936f)
* Whenever RSI gets to these levels (orange circles), we get a major bounce
* The next trading range:
* Spy 360 seems to be level we were fighting over in the past (red dashed line)
* SPY 340 was peak before COVID (blue dashed line)
* SPY 320 is the bottom of the level we were fighting over in the past (green dashed line)
* The bear market range:
* Red line = top of the range, good place to be selling
* Green line = bottom of the range, good place to be buying (or at least not selling)
**Could we go lower?**
* The chart looks terrible, and all signs point to continued downside moves.
* There is no “macro” reason why the selling would stop
* The market hasn’t completely priced in the current interest rate levels
* The bond market doesn’t seem to believe the Fed’s projected terminal interest rate. Either the fed or the bond market will be wrong and change their opinion
* Powell is in the bond market daily unwinding the balance sheet, that pushes up rates, and requires stock earnings to be further discounted
* More companies could pre-announce downside revisions to earnings – FEDEX and Ford sent the market lower and more downside revisions are probably coming
* Russia could use nukes
* Natural disasters, food shortages and other macro issues continue to deteriorate and that will cause commodities to be in short supply, that means prices going up, which means inflation is going to go up
* The dollar is strong and shows no signs of slowing down
* Financial conditions are tightening and money supply is coming down – assets can’t go up if money itself is going down
**What should you do?**
* Don’t buy calls: If you buy calls, and VIX comes down, you are not going to see the gains you expect, even if the market moves up.
* You will win on delta, lose on vega, lose on theta
* Do sell puts: If you sell puts you get to win on three greeks:
* you win on delta, win on vega, win on theta
* give yourself 2 weeks of time to realize this bounce because it might not start for a few days if it doesn’t start on Monday
* If you like shares, then consider the tripple leveraged ETFs for a short term trade
* If you are capable of thinking past this week, get long on growth equities, but only get companies you can see being around still in 2 years (SHOP, NFLX, META)
Don’t believe me? [I was right once.](https://www.reddit.com/r/wallstreetbets/comments/hlu2y3/q2_update_from_the_desk_of_jerome_powell/?utm_source=share&utm_medium=web2x&context=3)
View Reddit by mytendies – View Source
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Seriously, great DD and analysis. Really opens a plethora of strategies and is not just riddled with bias. Please do more
i don’t think Friday was bottom but I do think we see a gap up Monday and run up 4-6% before reversing near EOD Wednesday or mid day Thursday. Will be a bloody reversal then true bottom will be set in the week after
I bought Tesla calls.
Not a bad analysis. However, the cash on sidelines may choose fixed income instead of stocks.
I think history is not much help at the moment. You have the pandemic pull forward, massive stimulus which while declining is still somewhat in play. The war In Ukraine which screws up everything except defense stocks. Quantitative tightening which can’t help and in theory goes straight at asset prices. What’s new goes on and on.
I’d suggest flipping a coin at least you have a 50% chance of being right.
PS shorting puts can be pretty scary in a big leg down. I know this is a gambling subreddit, but you might want to buy deeper out of the money puts for some protection against the short puts, if someone is thinking about that.
What do you like for 3x leveraged ETFs? My SQQQ has been great. Same for SPXS. But they’re approaching 52 week highs so probably time to clear out for now.
“Not really, but that’s alright. Next caller!” – Jimmy Shill
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Great analysis man, so why the two year gap in post? Really enjoyed your DD
Loaded up on soxl and labu. Might add tqqq
I’m looking to close some of my very ITM spy pits if we take another leg down early. I do expect a dead cat bounce in the next few weeks, then more downside as everyone realizes we are fucked and any one of the sognificant downside risks takes place or worse something else happens we can’t anticipate. Very little upside in my book
I happen to agree with basically all of this post. Dip retest Monday and rally short term – IMO I’d think ATM calls with a SL will produce some gains if you buy on the dip.
So we bounce because everyone is expecting it to go lower and RSI says it should go up?
​
Not buying it.
​
There’s no catalyst for a rally. There’s no reason some of these stocks should have PEs in the high 20s when the Fed is committed to raising rates, creating pain in real estate, labor markets, fixed income and destroying demand to cause deflation. It’s the only way that they fight the money printing that occurred since the CARES Act rolled out.
Pro tip: You are all wrong.
Source: Yo mama.
Positions: All of them if you know what Im saying.
Pretty much sums up my thoughts exactly. Only things I would add is that earnings season starts in 3 weeks and we usually get a major face ripping rally into earnings. Also, we’ve had 4 red days in a row and we rarely have 5. Last time we had 5 red days in a row on spy was months ago when we were close to the june bottoms and the last time the nasdaq had 5 red days in a row was covid I believe
Thank you for your insight. It really paints a clearer picture of the week ahead. I encourage you to do this every week or so. It really helps a lot.
Market always over react. All indexes are down more than 20% now. Priced in? Who knows, but my guess is that it will bounce back, especially 3 to 6 months from now.
IPmed you basically I was wondering how I can try to get better reading on where the market will swing either up or down it seems you know a quite a bit more than me and I wanted to know would I be safe betting that Spy will probably be in the 350s in october
So stocks may go up or down
Past performance doesn’t determine future outcomes
But good write down
Hey thanks for the informative post! If I wanna open a second brokerage account just for credit spreads, what brokerage can get me that ability the quickest? I plan on doing credit spreads (cause I will have a super small account size). Do you need margin enabled for them to allow you to do this?
Slow down Big Brain…
I see no immediate rebound and I bet that way. Maybe end of week next week if we get some solid red. If people push bonds down to 2% then I will believe it is the bottom.
Is IV crush going to destroy weeklies and long dated calls?
Even if it bounces here, I might break even. Idk, will just wait this bloodbath out till some time next year. Just gonna scalp FX on 10:1 (or maybe sometimes 100:1) leverage for now lol.
How do u calculate implied move?
So why wouldn’t Put Credit Spreads but the go to? Your taking advantage of all the Greeks right??
 excellent analysis
Range bound during asia and europe market open…It would retest Friday’s low during pre market and trap perma bears at the open with strong bounce on Monday. Could do 50% retracement on weekly candle before sharp sell offs on thrusday & Friday.
How do you feel about my 11.5 ford puts that expire Friday?
What happens if China shit is real
you made my put options feel better
Are you sure you belong here? 
I sold F puts. Got assigned. I’mgonna sell calls now and slowly inch out of this mess.
Sell options on slow-moving high IV stocks… win….. Rince and Repeat
My only concern is if the bond yield goes up even further from where it was friday. If it does, that sidelines/bear play money may move out of equities and into bonds and we fall further. TINA is done, so the market may bounce less or not at all as short dated treasuries are bought up.
Why would jpow suddenly become dovish just because hes been hawkish three times in a row? Lol hes clearly stated they will keep at it until we’re clearly moving towards 2% inflation
So can I sell CCs 30-60 days on the stocks I own ITM when the bounce happens?
Thks man appreciate your wisdom and knowledge!
Any DD that doesn’t mention about Wendy’s or wife’s boyfriend has to be correct. Bravo
Finally someone with brains posted here
So, short term ITM calls on SPY would not be good? I was -thinking- of doing short SPY calls this week and then going long on OTM SPY puts with mid OCT exp. Not looking for financial advice, but your opinion would be nice.
I agree and have bought for a short term trade Friday. The RSI was oversold with an upside gap to $373, the markets always forward looking to fill untested territory and Reddit sentiment is really bearish which I like to inverse.
0dte straddles have worked so far
Thank you for sharing your thoughts
the dumbest shit EVER posted on WSB
Squeeze these nuts you fuckin nerd.
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